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From Dim To Grim?

$400 Million Rescue Plan Saves California Electric Crisis — For Now PUC Vote Short-Circuits Plan To Cut Power To Hospitals, Police But Bad Circumstances Continue To Multiply

SACRAMENTO, Jan. 19, 2001 (CBS) California lawmakers approved a $400 million rescue plan in a desperate bid to keep power flowing as the state's energy crisis continues to reverberate through the economy, threatening everything from milk supplies to gasoline deliveries.

The bill allows the state to buy power on the open market and provide it to cash-strapped utilities at little cost. Gov. Gray Davis was expected to sign the measure Friday.

Meanwhile, the state Public Utilities Commission called an emergency meeting to block Southern California Edison and Pacific Gas and Electric Co. from taking action on their own to scale back service to any of their 10 million residential and business customers.

The state's two largest utilities are both on the brink of bankruptcy and have been blocked from the California Power Exchange unless they provide collateral, forcing them to look elsewhere for power. State law requires the utilities to serve their customers no matter how poor their financial condition, the PUC's order said.

Shedding Some Light A shortage of power plants, rising natural gas prices, steadily increasing demand for power, and regulations on how wholesalers and consumers should pay for power are all key factors in the California power crisis. The order assures the utilities "will not and may not abandon service to customers over the weekend," PUC Chairwoman Loretta Lynch said.

As CBS News Correspondent John Blackstone reports, if Southern California Edison and Pacific Gas and Electric Co. had been allowed to go through with their plan, they would provide only the power they produce themselves — barely enough to serve half the state.

That could launch PG&E's doomsday plan, which calls for: 2.3 million residential customers to face blackouts twice a day without warning Hospitals, police and fire stations to face blackouts up to three hours in length Non-emergency businesses would face blackouts up to six hours in length.

The company says it all hinges on the ability of the Independent System Operator, keeper of the state power grid, to find enough electricity.

"The plan would be triggered on some day in the future when the ISO told California utilities that it could no longer procure power for them," said John Nelson of PG&E.

As part of its plan, PG&E had already started warning some customers that they could expect power shutdowns anytime soon. One of them was the Valero Refining Co., which produces 10 percent of California's gasoline.

"We received an advisory notice that un-interruptible customers were going to be rolled into the interruptible pool so we fear that our power may be cut off to us," said Richard Marcogliese of the Valero Refining Co.

If that happened, gasoline shortages could follow, causing some people to call California's energy mess "The Perfect Storm," a name given to a meteorological phenomenon in which storms violently collide.

"California is getting to the point where they are going to have a crisis that is a helluva lot bigger than the one it already has on its hands," said Bill Greehey, chief executive officer of Valero Energy.

The Public Utilities Commission's actions followed a second straight day of rolling blackouts that stretched from the Bakersfield area of central California to Oregon, 500 miles away. Power was turned off for about two hours to more than 675,000 California homes and businesses Thursday.

"I have a brand new baby. I'm worried about lights and heat," said Roland Plukas, 33, of Santa Monica. "I bought a flashlight yesterday, and I'm buying a bigger one today."

Power problems shut off the state's main gasoline pipeline and forced farmers to dump milk because the dairy plants were operating on reduced hours.

Hospitals and airports were exempt from the outages. Utilities refused to disclose which areas were blacked out, but the effects were obvious: Traffic lights went out for a second day across the San Francisco Bay area. Computer screens went dark, heaters and bank machines were silent and lights were off in classrooms.

The measure that the legislature approved is only expected to tide the state's energy-starved utilities over until a permanent solution is found.

"It is in fact the best of a range of absolutely terrible options facing this body," Assemblywoman Sarah Reyes said before voting in favor of the bill. "This is a Band-Aid we're going to put on a bleeding body."

The ISO said the latest blackouts were caused by a loss of thousands of megawatts from the Northwest, where hydroelectric dams are low on water. One megawatt is enough to power 1,000 homes.

Southern California escaped the blackouts. That was in part because of quirks in the state's distribution system that causes power bottlenecks in the north, making it harder to deliver electricity there than to members of the power grid located in the south. Los Angeles has a separate system.

Rolling Blackout Tips If a rolling blackout has you worried, here are some things you can do to make them harmless. The crisis is blamed in part on California's deregulation of its electricity industry.

Under the plan, utilities were forced to sell their power plants and buy electricity on the open market, an approach that was supposed to lead to lower rates. But wholesale prices for electricity have soared and rate caps imposed under deregulation have prevented utilities from passing on those costs to customers.

Pacific Gas & Electric Co. and Southern California Edison estimate they have lost more than $11 billion. They have both defaulted on millions in dollars in bills and lender payments and have warned that they are sliding toward bankruptcy.

http://cbsnews.cbs.com/now/story/0,1597,221065-412,00.shtml

-- Martin Thompson (mthom1927@aol.com), January 19, 2001

Answers

Isn't talk of a "doomsday plan" a little scary? It sure is to me.

-- Qman (qman@c-zone.net), January 19, 2001.

Under the plan, utilities were forced to sell their power plants and buy electricity on the open market, an approach that was supposed to lead to lower rates.

Why? Isn't this a key part of the problem? Not only did Alberta sell-off its power plants as well recently, but it did so at a horrific loss for their former owners, the people of Alberta. The cost of power immediately soared.

-- Rachel Gibson (rgibson@hotmail.com), January 20, 2001.